The Existential Threat to Bitcoin Its Boosters Said Was Impossible Is Now at Hand

By Christopher Mims

January 9, 2014

A doomsday scenario that has long been dismissed by bitcoin’s biggest boosters is now a clear and present danger. At 3am ET Thursday morning, a single bitcoin mining collective known as Ghash.io reached 45% of the computing power of all global bitcoin miners, just six points short of the 51% that would be required to break bitcoin by arbitrarily re-writing the transaction history upon which it rests. The result could be, at minimum, “double spending” of existing bitcoins, which would render the currency effectively unusable.

To put this in context: Imagine that tomorrow, a single corporate entity gained the ability to clone all of its dollars, and then immediately went on an asset buying spree. To say that it would undermine trust in the US dollar would be an understatement. That’s what could happen to bitcoin.

Popular discussion boards devoted to bitcoin are freaking out about this possibility, and every post on the homepage of, for example, the portion of Reddit devoted to Bitcoin is currently devoted to the dangerous rise of Ghash.io:

Reddit’s bitcoin page, at 10.30am ET today. Reddit

The entreaties of bitcoin fans on Reddit is having some effect: Between 3am ET and the writing of this article at 10am ET, the power of Ghash.io has diminished by seven points, to 38%, probably because of people leaving the collective in response to the backlash. But how close it came illustrates the long-term problem.